Singapore hotel market poised for steady rebound as border restrictions ease: CBRE

CBRE noted that investors continue to explore alternative uses for hotels. PHOTO: ST FILE

SINGAPORE (THE BUSINESS TIMES) - Visitor arrivals to Singapore are expected to pick up further over the course of this year to benefit hotels here as usage of the Vaccinated Travel Lane (VTL) scheme continues to grow.

According to data from CBRE's latest report on the Singapore hotel market, signs of nascent recovery emerged in the second half of last year, led by premium segments such as luxury and upscale.

The real estate company said it is upbeat, yet cautiously optimistic on the market's outlook for this year amid the release of pent-up travel demand, evident from a 172.4 per cent year-on-year increase in visitor arrivals over the second half last year.

Despite challenges such as pandemic-driven cost increases, the risk of new Covid-19 variants and the delayed reopening of travel to and from China, CBRE believes Singapore has "built a solid foundation for a steady recovery".

The hotel market is "poised for a steady rebound" as Australia - one of Singapore's major source markets -  has fully reopened its borders to vaccinated travellers, said CBRE.

"As the world adopts an endemic stance alongside rising vaccination rates, Singapore will add more countries to the VTL scheme over the course of the year. CBRE expects this to lead to a steady increase in visitor arrivals in the coming months."

While growth in new hotel room supply is projected to fall to around 2.1 per cent CAGR (compound annual growth rate) from recent years' average of 3 per cent due to construction disruptions caused by Covid-19, CBRE believes this will only be in the short term.

The company noted that the tapering could in fact provide relief for the hotel industry as visitor arrivals recover from a very low base.

New initiatives announced by the Singapore Tourism Board (STB) are also expected to boost demand for hotels in the country.

These include the planned expansion of Resorts World Sentosa, the recent extension of Singapore's contract to host the Formula One Singapore Grand Prix for seven more years and several major Mice (meetings, incentives, conferences and exhibitions) events confirmed by the STB for this year.

Average occupancy for the second half of last year rose to 65.3 per cent, up 6.5 per cent over the second half of 2020, said CBRE.

Average daily rates grew 23.8 per cent over the same period to $168.10.

Amid overall revenue per available room (RevPAR) on-year growth of 35 per cent to end 2021 at $111.40, luxury hotels registered the strongest RevPAR increases, while those in the economy segment posted the weakest performance.

Hotel investment activity also picked up last year, with four transactions worth a total of $51.4 million completed over the year.

While transaction volume remained low as deals involved mainly smaller boutique hotels, CBRE noted that investors continue to explore alternative uses for hotels - with their conversion to co-living properties being among the most popular strategies.

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